STRATEGIC PLANNING AND BUDGETING Part 1 Business Model and Strategy.ppt

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1、STRATEGIC PLANNING AND BUDGETING Part 1:Business Model and StrategyCase Study,Concepts and Debatable IdeasKenny OngCNI Holdings Berhad,Intro:CNI,20 years oldCore Business:MLMOthers:Contract Manufacturing,Export/Trading,eCommerceMalaysia,Singapore,Brunei,Indonesia,India,China,Hong Kong,Philippines,It

2、aly,Taiwan,Oman,United States,VietnamStaff force:500Distributors:200,000Products:Consumer Goods and Services,History of Strategic Planning and Budgeting,Planning in the“old”days,Budget top down no questions askedOnly two budget goals revenue,expensesThe only planning we needed to do was“do better th

3、an last year”Planning was bottom up-compilation of plans within set budgetNo one knew what the other was planningAccountings role was only to compile budget for approvalKPIs were not usedSales was resource priority,everything else not importantAssumed no major changes in marketR&D was bottom up,Prob

4、lems from the start,Problems from the start(1/2),No moneySplit Objectives:Sales?Share Price?Image?Independent entitiesAccounts controlling scheduleS&M always running over budgetCompounding activities BOD expectations too high without proper explanation nor justificationLack of Market researchExpense

5、s not spent gets punished,Problems from the start(2/2),Budgeting for known,consistent,and predictable business conditionsNever learn from past mistakes,usually in under-budgeting(e.g.staff and PCs)Wrong Business Model blame Budgeting&Planning.Having a good planning process cannot correct a bad busin

6、ess modelFocusing on the Process(KPIs),instead of“Business”Planning&budgeting treated as separate processes by businesses/functions,Todays Agenda,Summary:Planning&Budgeting,Long-term PlansObjectivesStrategiesEnablersResources,Also known as L.O.S.E.R.,Summary:Todays presentation,1.Business Model,2.St

7、rategy,3.Alignment,4.Resources,Assumptions 1:Audience,BusinessGovernmentNon-profit,Assumptions 2:Starting Point,Wanting to start proper planning&budgeting process,orWanting to improve planning&budgeting process,1.Get the right Business Model first,How to fail without trying,1.Wrong Business Model,Th

8、e Roadmap to Failure Fred Wiersema and Mike Treacy,Performance,Time,Denial and Defense,“Its not really good value our competitor is offering,because it doesnt include a lot of our features.”-ABC vs Air Asia“Its good value but not in our preferred customer market.”-ABC vs Toyota“Sure theyre hurting u

9、s,but with their unfair advantage,what can we do?”ABC vs MILO“The rules we are playing by have always worked before”AMEX vs VISA,The Roadmap to Failure Fred Wiersema and Mike Treacy,Performance,Time,Ad Hoc Tactics,Selectively hold discounts to hold business that has started to go elsewhereIntroduce

10、new promotions,terms,conditions,and offers to confuse and cloud the marketBeef up customer service by adding people to fix mess-ups and quicken delayed shipmentsDelay capital investments and adjust accounting methods to portray quarterly financial results more favorablyIntroduce“new and improved”pro

11、ducts that are new in form,but not in substantive ways that are of consequence to purchasersIntroduce Balanced Scorecards and Performance Management Systems,The Roadmap to Failure Fred Wiersema and Mike Treacy,Performance,Time,“What is the moral of the story?”,What is the Business Model?,USP,Market

12、Discipline,Profit Model,Intro:Market Discipline,Mamak stall,Intro:Market Discipline,They are the most innovativeConstantly renewing and creativeAlways on the leading edge,A great deal!Excellent/attractive priceMinimal acquisition cost and hassleLowest overall cost of ownershipA no-hassles firmConven

13、ience and speedReliable product and service,Exactly what I needCustomized productsPersonalized communicationsTheyre very responsivePreferential service and flexibilityRecommends what I needIm very loyal to themHelps us to be a success,Product Leadership,OperationalExcellence,CustomerIntimacy,Operati

14、onal Excellence(low cost producer),Ref:The Discipline of Market Leaders,Michael Treacy 1995,Product Leadership(best product),Customer Intimacy(best total solution),Strategy:Value Disciplines,www.myCNI.com.my,www.OOBEY.com,Operational ExcellenceCompetitive priceError free,reliableFast(on demand)Simpl

15、eResponsiveConsistent information for allTransactionalOnce and Done,Customer IntimacyManagement by FactEasy to do business withHave it your way(customization)Market segments of oneProactive,flexibleRelationship and consultative sellingCross selling,Product LeadershipNew,state of the art products or

16、servicesRisk takersMeet volatile customer needsFast concept-to-counterNever satisfied-obsolete own and competitors productsLearning organization,Strategy:Value Disciplines,www.myCNI.com.my,www.OOBEY.com,The McPlaybook*,Make it easy to eat50%drive-thruMeals held in one hand,Make it easy to prepareHig

17、h TurnoverTasks simple to learn&repeat,Make it quick“Fast Food”Tests new products for Cooking Times,Make what customers wantProwls market for new productsMonitored field tests,*Adapted from:Businessweek,Februrary 5th 2007,www.myCNI.com.my,www.OOBEY.com,Operational Excellence(low cost producer),Ref:T

18、he Discipline of Market Leaders,Michael Treacy 1995,Product Leadership(best product),Customer Intimacy(best total solution),Strategy:Value Disciplines,www.myCNI.com.my,www.OOBEY.com,Operational Excellence(low cost producer),Ref:The Discipline of Market Leaders,Michael Treacy 1995,Product Leadership(

19、best product),Customer Intimacy(best total solution),Strategy:Value Disciplines,www.myCNI.com.my,www.OOBEY.com,Intro:Market Discipline,*Treacy&Wiersema,The Discipline of Market Leaders,1995,Product/Service Attributes,Relationship,Image,Intro:Market Discipline,*Treacy&Wiersema,The Discipline of Marke

20、t Leaders,1995,Product/Service Attributes,Price,Quality,Time,Selection,Smart Shopper,Relationship,Image,Operational Excellence:Quality and selection in key categories with unbeatable prices,Intro:Market Discipline,*Treacy&Wiersema,The Discipline of Market Leaders,1995,Product/Service Attributes,Bran

21、d,Time,Function,Best Product,Relationship,Image,Product Leadership:Unique products and services that push the standards,Intro:Market Discipline,*Treacy&Wiersema,The Discipline of Market Leaders,1995,Product/Service Attributes,Service,Trusted Brand,Relationship,Image,Customer Intimacy:Personal servic

22、e tailored to produce results for customer and build long-term relationships,Relations,Operational Excellence(low cost producer),Ref:The Discipline of Market Leaders,Michael Treacy 1995,Product Leadership(best product),Customer Intimacy(best total solution),Strategy:Disciplines,Summary:Todays presen

23、tation,1.Business Model,Done,2.Strategy,3.Alignment,4.Resources,2.Set the Strategies,Hope is not a strategy,What is Strategic Planning?,Strategic Planning,Variables:ResearchGrowthRisksStakeholdersConstraintsSWOTMisc.,Output:PlansPrioritiesKPIs,Before we start,Which comes first?Strategies-KPI?KPI-Str

24、ategies?,Step 1:Analysis,SWOTPESTELScenario Analysis,SWOT:Opportunities&Threats,Opportunities=Taking advantage of Trends,Threats=Strategic Risk Management,Downturn Trends?,Downturn Trends?,Downturn Trends?,Downturn Trends?,SWOT:General Strategic Risks,IndustryMargin SqueezeRising R&D/CAPEXOvercapaci

25、tyCommoditizationDeregulationIncreased power among suppliersExtreme business-cycle volatilityTechnologyShift in technologyPatent expirationProcess becomes obsoleteBrandErosionCollapse,CompetitorEmerging global rivalsGradual market-share gainerOne-of-a-kind competitorCustomerCustomer priority shiftIn

26、creasing customer powerOver reliance on a few customersProjectR&D failureIT failureBusiness development failureMerger or acquisition failureStagnationFlat or declining volumeVolume up,price downWeak pipeline,Adrian J.Slywotzky and John Drzik,PESTEL and Scenarios,Business Situation vs.Focus,Upturn,Fl

27、at,Downturn,Fight ComplacencySharpen EdgeKeep MomentumConquer,Change mgmtReduce FatContinuityEveryone Happy,InnovationAcquireProfitsBuild momentum,SalesCash Flow,Talent MgmtInnovation/R&DEarly winsSlow Down HR Costs,Top Talent focusSales,Sales,SalesIncrease attrition,www.myCNI.com.my,www.OOBEY.com,B

28、usiness Situations vs.Focus,Upturn,Flat,Downturn,Fight ComplacencySharpen EdgeKeep MomentumConquer,Change mgmtReduce FatContinuityEveryone Happy,InnovationAcquireProfitsBuild momentum,SalesCash Flow,Talent MgmtStack R&DEarly winsSlow Down HR Costs,Top Talent focusStack SalesIncrease attrition,Many t

29、imes,you need a different CEO/Leader/Management Team for each business situation,www.myCNI.com.my,www.OOBEY.com,Step 2:What is your Goal?,Cost ReductionGrowth,Strategies for Growth,“Double-Digit Growth”,Michael Treacy,www.myCNI.com.my,www.OOBEY.com,Growth,ExpansionConsolidateGeographicDistributionCo

30、mpensate,TransformativePortfolio refocusDiversification,Easier,Tougher,www.myCNI.com.my,www.OOBEY.com,Growth thru Expansion,ExpansionConsolidateGeographicDistributionCompensate,Gain Scale to competeIntegrated SolutionsFinancial GrowthSupply(security,mix)Developing marketsHigh cost of Extra CapacityP

31、rivate EquityExpanding Sovereign Funds,www.myCNI.com.my,www.OOBEY.com,Growth thru Expansion,ExpansionConsolidateGeographicDistributionCompensate,De-regularizationDemand outstrip supplyRevenue Mix Tax optimizationTalentNew,Low-cost EntrantsUndervalued Big PlayersNewer Assets,www.myCNI.com.my,www.OOBE

32、Y.com,Transformative Growth,TransformativePortfolio refocusDiversification,New Business LinesSelling/Spin-off non-coreIncrease product lineNew customersNew technologies*Complementary BusinessUp-down Supply ChainPatentConvergence anticipation,www.myCNI.com.my,www.OOBEY.com,Cross Sector Transformation

33、,www.myCNI.com.my,www.OOBEY.com,Cross Sector Transformation,New Delivery,New Sources,Existing Resources,Oil,Gas,Electricity,Coal,Biomass,Nuclear,Ethanol,Wind,Solar,www.myCNI.com.my,www.OOBEY.com,Example:Energy Sector,Step 3:Strategy,“Double-Digit Growth”,Michael Treacy,www.myCNI.com.my,www.OOBEY.com

34、,How Markets determine Growth Strategies(1),Growth Rate,www.myCNI.com.my,www.OOBEY.com,Churn Rate,How Markets determine Growth Strategies(2),www.myCNI.com.my,www.OOBEY.com,How Markets determine Growth Strategies(3),Example:XYZ Sector,www.myCNI.com.my,www.OOBEY.com,Create better Value propositionNeut

35、ralize competitor advantagesBuy Market Share outrightPrice PremiumOperating ModelIntegration,Strategy 2:Share Gain,www.myCNI.com.my,www.OOBEY.com,Buying Market Share:Acquisition strategy,No evidence of previous company,One KingdomPre-integration BlueprintSlow Trigger,Fast Bullet,www.myCNI.com.my,www

36、.OOBEY.com,Buying Market Share:Side notes on Funding,www.myCNI.com.my,www.OOBEY.com,*Adapted from Warren Buffets acquisition strategies,Strategy 4:Invade Adjacent Markets,Adjacent Market=Important Similarities and Large Differences in:Cost StructureCompetitorsCustomersCritical Capabilities,www.myCNI

37、.com.my,www.OOBEY.com,Strategy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Strategy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Example:Energy Sector,Strategy 4:Invade Adjacent Markets,Upstream,Midstream,Downstream,Distribution,Conversion,Raw Mat,Vendors/Services,www.myCNI.

38、com.my,www.OOBEY.com,Is it a promising market?Best when market is new and not stableYou must time your entry carefullyEntrenched companies usually delay embracing new technology or processCan you win in this market?Must be built on advantages that are tangible,practical and easily implemented,Strate

39、gy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Can you match the Standards of Competition in this Market?You do have to meet the quality level that is common in the marketThree Standards:-Technology,Relationships,Business-modelYou must have 80 percent of the capabilities you need to mat

40、ch competitors Standards,Strategy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Make or Buy?It is easier to meet the standards of competition if you buy an existing playerAdjacent acquisitions must remain as a separate enterpriseIntegrate Management Control(systems,technology)Inter-transf

41、er of management talent,knowledge and capability are important,Strategy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Strategy 5:Acquire new Business,No core advantage to bring inInvestors mind-set vs.Managers mind-setValue unlocking via operational improvementsInvest in Management/LeadershipPremium=Combined value stand alone,www.myCNI.com.my,www.OOBEY.com,Thank You.,soft copy of slides:,